Canon Inc., the world’s largest camera maker, cut its annual profit forecast and predicted its first drop in sales of models with an interchangeable lens as consumers switch to smartphones to take photos.

Net income will probably total 240 billion yen ($2.5 billion) for the year ending December, the Tokyo-based company said in a statement yesterday, cutting its earlier forecast of 260 billion yen. The new projection missed the 250.8 billion-yen average of 21 analyst estimates compiled by Bloomberg.

Smartphones are eating into digital camera sales as companies such as Apple Inc. and Sony Corp. release new handsets with stronger built-in lenses and sensors to lure shoppers. The value of worldwide camera shipments dropped 19 percent in August from a year earlier, a ninth consecutive monthly decline, according to the Camera & Imaging Products Association in Tokyo.

The facts that Canon predicted its first drop in sales of models with an interchangeable lens is surprising for me and probably it is a big problem, since that is the more profitable part of their camera business.

So you know where I'm coming from, I'm a filmmaker and producer but I've also worked in advertising and tech. I follow tech developments quite closely, especially Apple and camera news.

In my opinion --

Canon cannot afford to be afraid to protect their higher end markets anymore. Sure, they produce amazing EOS still and EOS cinema bodies but they can't worry about cannibilization anymore. Canon makes GREAT products. Professionals will continue to buy 1D-Xs and C500s even if they sell the same autofocus points in a 7D or a Rebel, or enable RAW video in a 70D.

Canon has high-end lenses, both still and cinema/video, that professionals will continue to buy no matter what. Canon has tons of patents and will continue to innovate. It just has to have the confidence to not worry about those who will stop buying their high-end products.

Give people what they want- give them RAW video at an affordable price (yet with a healthy profit margin). Apple successfully cannibalizes itself over and over and over. Jobs said it best when he said (and I paraphrase) sell low and go for volume.

Oh, and in case you're listening, Canon, yes -- I do want you to OFFICIALLY enable RAW in the 5DIII and 1DC and sell them for less. Don't worry, we'll buy more of them.

People that are satisfied taking pictures with there phones most likely never where in the DSLR market to begin with.Thats just the social pic snappers people that like good quality pics will always want a DSLR but hey its recession/crisis. My free spendable income keeps going down as insurancen, Food and everything keeps going up in price and my income isnt going up.so i simply do not have money for thoustant dollar bodys and multi thousant dollar lenses.The last generation canon lensen have had some seriously absurd price gains which most normal non professionals simply can no longer afford.

Like the 70-200 F2.8 IS that lens wwas 1350 euro the new IS II is a whopping 50% more expencive at 2086 euro.The same happend with all other new lenses so canon just like any other greedy company in this time of recession is doing this to itself.A normal wise company would lower prices which upps sales and helps the economu but for some reason in this crisis all companys seem to upp prices which lower sales and then bitch about it.The greed has gone to there heads.We the consumers dont have the money for your insane prices anymore ajust to it or see your sales drop even more.

People that are satisfied taking pictures with there phones most likely never where in the DSLR market to begin with.Thats just the social pic snappers people that like good quality pics will always want a DSLR but hey its recession/crisis. My free spendable income keeps going down as insurancen, Food and everything keeps going up in price and my income isnt going up.so i simply do not have money for thoustant dollar bodys and multi thousant dollar lenses.The last generation canon lensen have had some seriously absurd price gains which most normal non professionals simply can no longer afford.

I agree here, it's not the smartphones eating into the dSLR market, the smartphones kill the P&S cameras.I think several things come together for dSLRs:

1) the dSLR market is quite mature now. In a decade, a remarkable improvement happened in sensor technology, so there was incentive to switch from film to digital, there was incentive to upgrade to a new model dSLR. So, there was a big "bubble" so to speak of pent up demand that could be satisfied. Many people that would buy a dSLR have one by now probably. Now, I think the market will return more to a level situation where you go through normal replacement cycles. People will think twice before they buy a new body, "does it really give much more than what I already have?" That's why Canon and everybody is also pushing the video area, to keep adding new features and thereby a market sector not yet saturated. Even that is not enough anymore, as camera makers are looking into medium format, and security camera businesses. Pushing more megapixels (D800) down the throat of people is probably not giving the huge sales increases hoped for - many people realize that files get huge and the improvement in quality is minimal if one doesn't invest time and effort to get the maximum out of the sensor. And most images are viewed on screens that don't have such a high resolution. Likewise, the dynamic range wars (whether 12 or 14 stops) are incremental gains that will not cause a huge boost to the market. Of course, there will always be pros, and tech users that go for the top - as with computers, where gamers build their own customized ultimate gaming machines, but this is a limited market.

2) As pointed out, weak economy, people need to save.

3) Maybe less newcomers to the market. There tend to be fads of what's a hot hobby, maybe the hype for pictures is somewhat dying down, people being oversaturated with images flooding the web.

So, the only way to get a lot of people to buy new cameras is with a substantial innovation in sensor technology.

Lagging behind the opposition in the mega pixel stakes can't help either

Yeah, that makes sense. I mean, it's not like the 5DIII is outselling the D800, or the 6D is mopping the floor with the D600/610, or the Rebel/xxxD bodies are outselling the D3xxx bodies, right?

At the same time every sold 5D3 means a potential buyer less, thats until you offer an upgrade path.And we could get a nice step forward for both still and motion picture by blending a 5D3 with a 70D(+some up to date processing)...

Not releasing anything interesting except the 70D could have something to do with it.

Yep. When your competitors are experimenting with new models and new lines, and all you're doing is giving minor updates to your existing stuff, you lose market share. Ask Apple.

Did you not read what neuroanatomist said above? Canon's competitors, who supposedly have superiorproducts, are having a worse time of it!

Where does he say that?

In my first post in this thread. Ok, I didn't say it explicitly...and silly me, I forgot the sarcasm tags. So, let me try that again:

<sarcasm>I mean, it's not like the 5DIII is outselling the D800, or the 6D is mopping the floor with the D600/610, or the Rebel/xxxD bodies are outselling the D3xxx bodies, right?</sarcasm>

All better now?

The point is, Canon's forecasts are lower because the dSLR market as a whole is contracting. Canon is still the leader of that market, and nothing I've seen indicates that they're losing market share relative to their competition. People on forums can whine about incremental updates, poor DR, etc., but Canon is still doing what they've done now for many years - sell more dSLRs than their competitors (even if the total number they'll sell next quarter is less than they initially predicted).